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Chapter 3Planning and Forecasting

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apter ect ves

Explain the needs for planning and analyze a planningmodel

Be able to solve forecasting problems

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PlanningProvides method for identifying objectivesDesign sequence of programs and activities to achieveobjectivesPlan to plan

People implementing plan should be involved in preparingplan

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Planning Process Decision MakingProcess

(this occurs as a diagram in the book & is iterative)Define the decision problemSearch for data and information

Generate alternative courses of actionAnalyze feasible alternativesSelect best course of actionImplement decision and evaluate results

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Planning

What is the Problem/Purpose?Establish Goal/ObjectivesWhat Client Need Is Being Satisfied by the Project?

Identify Success Criteria

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The Foundation for Planning

Vision : what the firm wants to be in the future (when novision: Vietnam war ex.)Mission : bold goal with clear finish line and specific timeframe, what do we want to doPurpose : fundamental reason for firms existenceGoal/Aim : What? Why? For whom? How? Is it consistentwith organization? (official and operative)Objectives : Clarifies goals, how do we go about it?

Must be reviewed often to see whether they are still valid

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Planning Develop Objectives

S pecificM easurableA ttainable

R ealisticT ime-limitedOutcome - what is to be accomplishedTime Frame - expected completion date

Measure - metrics for successAction - how the objective will be met

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Strategic Planning Business a company is in Business acompany wants to be in Business Portfolio Matrix Cashcows (milk profits) Stars (invest more) Large Small Dogs(eliminate) Slow-growth ??? (increase market) Fast-growth Market share MARKET

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Strategic Mgmt. of Tech.

Base tech.: firm must master these to be effectivecompetitors, invest in R&D to maintain competenceKey tech. : provides competitive advantage, can embedfeatures to get better efficiency in production processPacing tech. : could become tomorrows key tech.

Issue is to maintain balance between key andpacing techs.

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Some planning concepts

Responsibility for planning: rests with top and middle level mgrs.Must estb. enterprise objectives, overall strategy, planningguidelines, review and redirect planning effortPlanning premises: the anticipated env. in which plans are

expected to operate. Future economic conditions, govt. decisions,competition and markets. Develop contingency plans if premisesgo wrongPlanning horizon: how far one should plan. Depends on nature of business and plan. Ex. Nuclear power plantSystem of plans: yearly forecastsPolicies and procedures: policies -> clear, flexible, communicated,procedures -> SOP

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Forecasting

Forecast salesEssential preliminary to effective planningEngineering manager must be concerned with both future

markets and future technology

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Why Forecasting?

New facility planningProduction planningWork force scheduling

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Long Range Forecasts

Design new productsDetermine capacity for new productLong range supply of materials

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Short Range Forecasts

Amount of inventory for next monthAmount of product to produce next weekHow much raw material delivered next week

Workers schedule next week

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Forecasting Methods

Quantitative Methods Expert/executive Opinion, DelphiHistorical (sales force composite): regional managers asktheir salesmenUser expectation: ask customers, good if few customersChoice of method: many methods can be combinedQualitative Methods Simple moving averageWeighted moving averageExponential smoothingRegression models (simple/multiple regressions)

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Delphi Method

Eliminates effects of interactions between membersExperts do not need to know who other experts are

Delphi coordinator asks for opinions, forecasts onsubject

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Delphi Method, cont

Develop objective of forecastDetermine number of participantsSelect and contact participants

Develop first questionnaire and submit

Coordinator analyzes responses

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Delphi Method, cont

Develop second questionnaire based on results of firstAnalyze responsesRounds continue until consensus reached or experts

opinions cease to change